You may have heard that the laws surrounding the collection of certain aviation taxes have expired and are not currently applicable. I have received several calls and emails on this and there seems to be some confusion surrounding the topic.
Here is the official line from the IRS. “The laws authorizing the airline ticket tax and other aviation-related taxes expired at midnight on Friday, July 22. The IRS continues to monitor pending legislation related to this issue. The IRS will continue to work with the airline industry to address issues related to the collection and payment of the taxes involved. Taxpayers do not need to take any action at this time. The IRS will provide further guidance on this issue in the near future.”
What does all that mean? Well, whether an airline ticket or a charter flight, there are certain federal taxes charged on those flights. Since Congress adjourned for the weekend on Friday, July 22, they did not pass another extension of the FAA reauthorization legislation. This means that the authorization to collect these taxes expired as of July 23. Until they are reinstated by congress, the following federal air transportation excise taxes do not apply to transportation beginning on or after July 23, 2011:
- The 7.5% tax on the base ticket price
- The domestic segment tax of $3.70 per person per leg
- The international travel facilities tax of $16.30 per person for flights that begin or end in the US, or $8.20 per person for a flight that begins or ends in Alaska or Hawaii, and
- The 6.25% tax on the amount paid for transportation of property by air
Airlines and charter operators are not authorized to collect these taxes until Congress introduces legislation that reinstates them. I have seen several operators, charter broker companies, and travel websites suddenly running around and waving a big “book now no tax” flag. Be cautious though. When dealing with the government and taxes, they always get their money. It is unknown how long until Congress addresses this issue. It is also unknown how they will handle this period of time where taxes were not collected. Some believe that the taxes, once reinstated, could be retro-active.
I’ve been asked if someone who booked on or before July 22, for a flight on or after July 23 can be issued a refund of the itemized taxes. If you have ever found IRS tax code to be vague, then this will be no surprise to you. “Passengers who have paid for tickets on or before July 22, 2011, for travel beginning on or after July 23, 2011, may be entitled to a refund of the tax.” Airlines and charter companies are permitted to refund the tax, but there is no direction as to how to go about this or any indication that an airline or operator must refund the tax. You will probably not have any problem getting a refund of these taxes from a reputable carrier. The language also looks as if there will be a method of receiving a refund of those taxes directly from the IRS, but a process for that has not yet been established. Just look at your charter quote or airline ticket receipt closely and make sure that there is not a line item for any of the above mentioned taxes.
As with most other topics that I write about in this space, working with a knowledgeable and reputable operator or broker is the best way to stay in the loop on this tax issue and avoid confusion. There are many other challenges in front of congress at the moment, so it is unknown how long this situation will last.
If you have specific questions about planning a charter flight, just a general private aviation question, or would like to share your experiences on this topic, please feel free to contact me via this form or by posting a comment on this blog, or email email@example.com.